A Tale of Two Trade Deals

Never mind Asia, time to pivot to Europe.

By Clyde Prestowitz

That entity would be the world?s biggest, richest economy. It would eliminate the structural impediments to U.S. exports in much of Asia, and bring most of the world economy under a true free trade standard. With this kind of a union there would be much less currency manipulation and much less (if any) need for ?pivots? and more U.S. military in Asia. But, alas, Washington isn?t even thinking about anything like this, even though it would be a game-changing economic and geopolitical move.

So if the TPP looks like a lose-lose situation for the United States, what about a deal with Europe?

This notion was first voiced at a high level in 1995 when then Secretary of State Warren Christopher proposed a joint effort to better bridge the Atlantic. In November of that year, I was with 100 European and American CEOs when they met in Seville, Spain, and proposed a far-reaching agenda to increase trade and investment in the European and American markets. The following December, Washington and Brussels agreed to conduct a joint study on how to reduce tariff and non-tariff barriers. In a book at the time, I cited analysis by my own Economic Strategy Institute estimating that a TAFTA would boost U.S. GDP by 1.6 to 2.8 percent while raising EU GDP by 1 to 1.9 percent.

Nevertheless, objections were raised. Because it would be so large, some feared that a U.S.-EU deal might destroy the newly created WTO. Because the markets were already highly integrated, the likely gains from the deal might be small. A formal negotiation might actually worsen U.S.-EU relations by bringing contentious issues, like subsidies to our respective aircraft manufacturers, brutally to the fore. Some also said it would really be the rich, white guys ganging up against the rest of the world. So nothing happened. Eventually the WTO launched the aforementioned Doha Round, in which important parts of the rest of the world thumbed their noses at the European and American visions of free trade.